Financial Regulatory Forum

EU president Sweden vows quick action on crisis

By Reuters Staff
July 15, 2009

By Julien Troyer
STRASBOURG, France, July 15 (Reuters) – European Union president Sweden promised on Wednesday to secure quick agreement on moves to tighten financial regulations to combat the economic crisis and on steps to fight climate change.
Presenting Sweden’s plans for its six-month presidency of the bloc, Prime Minister Fredrik Reinfeldt said member states could face more problems if they did not stop injecting money into their economies and banking systems early enough.
He said the worst economic crisis since World War Two could threaten the European social model of generous welfare, which is already strained by ageing populations.
“We must restore confidence in the financial markets. We must quickly put into place a strengthened supervisory system to prevent similar crises from occurring in the future,” Reinfeldt told the European Parliament in the French city of Strasbourg.
As EU president for the rest of the year, Sweden will steer negotiations on new rules for banking supervision, hedge funds, derivatives, capital requirements and executives’ pay proposed by the European Commission, the EU executive.
Reinfeldt said EU states could not afford to keep pumping billions of euros into their economies to try to stimulate them and should agree a strategy to bring budget deficits below the bloc’s cap of 3 percent of gross domestic product.
“Short-term imbalances will otherwise be followed by chronic deficits, which in turn lead to large cutbacks — already a reality in parts of the EU,” he said.
“Some years ago, we experienced this in Sweden. Mass unemployment, social unrest and a rising tax burden then await.”

DIVISIONS OVER WAY FORWARD
The 27-nation EU is split over how quickly its members should end their spending sprees. Sweden and Germany want an early return to fiscal prudence, while Britain and France favour keeping their fiscal stimulus programmes for a longer period.
Unemployment hit a 10-year-high of 9.5 percent in the 16 countries that use the euro currency in May, and the European Commission has forecast the overall EU deficit will be 6 percent this year and 7.3 percent in 2010 unless policies are changed.
Reinfeldt, whose country took over the EU presidency on July 1, vowed to reach an agreement on a common EU position for climate talks in Copenhagen in December at which a new United Nations treaty on harmful emissions is sought.
The EU is divided on how to aid developing countries in their efforts to curb carbon dioxide emissions blamed for global warming. This is an important issue if a deal is to be secured.
“Our world has a fever. The fever is rising — and it is up to us to react… We must show leadership and stand by our promises. Europe has a crucial role in getting others to sign up to a global agreement,” Reinfeldt said.

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